Russell 2000: The Ultimate Gamble—Buy, Sprint, or Sink
Most individuals will look at the chart below and state that hell is breaking loose, but look carefully at the Russell 2000 chart, and you will notice that the Russell 2000 is trading almost three standard deviations from the norm. The markets always revert to the mean, so this is a long-term opportunity. The first stage of the recovery phase will favour mid to large caps, and the second stage will be kind to small caps stocks.
Retail sales look terrible, but the Russell 2000 looks great.
This is another terrible-looking picture, but this picture serves to remind us that the long-term outlook for regular retailers is downhill. The online trend is going to continue gathering steam. As a testament to this, Amazon hit a new intraday high today, and many of the stocks in the AI sector that we are following have recouped a significant portion of their losses, indicating that they will be trading at new 52-week highs long before the Dow tests 29K. When you look at the last two charts, the key takeaway is that the markets are generally climbing a wall of worry. This means that, for the most part, they have priced the worst news in.
Conclusion
The Dow is likely to test the 24K to 24.5K ranges with a possible overshoot to 25,000. Market Update April 7, 2020
The Dow traded slightly past 24K before pulling back. However, it hit our initial upside targets (23,100 to 23,600), the 1st trigger points for the multi-tiered option play. Could the Dow still test the 24.5K range? That’s always a possibility. Ideally, the pullback is quick and fast as this would scare the hell out o the early bulls. Why is this good? The crowd will remain nervous for a longer period, and the longer the crowd remains nervous, the stronger this bull becomes.
The government and the Fed will do whatever it takes to support this economy, even if it means giving money out to Americans under the guise of helping them.
“A one-time, $1,200 check isn’t going to cut it,” Khanna said. “Americans need sustained cash infusions for the duration of this crisis in order to come out on the other side alive, healthy, and ready to get back to work.” https://cutt.ly/pt3oA0B
The amount of money already directed towards this market is stunning, but this is not the end. They have now conditioned the masses to think that a Trillion dollars is no longer a big deal, so a host of programs will follow. We expect a massive infrastructure program to be unveiled and at least one more program directed at helping individuals and small businesses. These cash infusions will be like pouring rocket fuel on a fire. In plain English, the eventual upward move is going to be so strong that those that failed to anticipate and plan for this event will be left in a state of shock for years to come.
